It's really quite rude to publicly call someone a liar without evidence, and by saying it doesn't happen after I said it's happened to me, you're calling me a liar. Your single anecdotal experience does not define the entire industry, especially in the face of both experiences and plain contract terms that state otherwise.

Take a look at the contract you signed to open your merchant account. Look for the words "risk reserve" or "reserve account". That's where money goes when the account is being reviewed or is reclassified as higher risk but isn't being terminated. Frozen PayPal accounts that aren't being terminated can still accept payments, they just can't withdraw money -- it's the same situation as a merchant account provider holding funds in a reserve account.

Here's some verbiage I copied straight out of one such contract:

9.16 RESERVE ACCOUNT

In addition to the security interest and chargeback rights granted to Bank by Merchant, Merchant hereby authorizes Bank to establish a Reserve Account, with or without prior notice to Merchant, at any time prior to, at or after termination of this Agreement, to ensure Bank’s recovery of any liabilities owed it or reasonably anticipated to be owed it by Merchant pursuant to this Agreement.

Such liabilities include, but are not limited to, those arising out of actual and/or potential post-termination chargebacks, as well as any and all post-termination fees, including, but not limited to, costs for accounting, investigation and account management, charges and expenses due or anticipated to be due Bank from Merchant.

Merchant agrees that if Bank does establish the Reserve Account, it shall be in any amount that Bank, in its sole discretion, deems reasonable under the circumstances. The Reserve Account may be funded and/or replenished by Bank’s withholding or withdrawing from, or freezing all or any part of, the Commercial Account and/or accounts maintained by Merchant with Bank. Unless Bank agrees otherwise in writing with Merchant, the Reserve Account shall not bear interest.

Bank may enforce its security interest in the Reserve Account without notice or demand. Bank’s right to sums owed it by Merchant pursuant to this Agreement shall in no way be limited by the balance or existence of the Reserve Account. Bank’s rights with respect to the Reserve Account, as well as the security interest granted Bank under this Agreement, shall survive the termination of this Agreement.

As it says, your account may be frozen, funds may be withheld, the account can be established unilaterally without notice. Standard merchant account agreement. It's not there for no reason.

Many businesses don't have a direct relationship with the bank that underwrites their merchant account. They get the account from an MSP/ISO and some bank underwrites those accounts. It's the underwriting bank that does things like establish a risk reserve without notice because a big chargeback came in and that flagged your account for a review. When that happens, there is no opportunity for the MSP/ISO to contact you and talk it through first -- the freeze isn't placed by them and can't be removed by them. They'll tell you about it, and perhaps help convince the bank to remove it, but that'll happen after.